This past week I was in Kenton, OH, and Sioux Center and Lemars, IA. I spoke to nearly 600 producers.
First, the Northwest Iowa area is a very productive region and should maintain that status in the future. It has good soils, very strong infrastructure, good access to markets, and a strong agrilender presence, which ensures a sound capital base. This area is also close enough to Sioux City and Sioux Falls for the lifestyle attributes that the younger generation is demanding when analyzing areas in which to locate.
A question asked in both Ohio and Northwest Iowa was, "Are people who are paying high amounts for land cash rents going to be able to continue to do so?"
My response is that both lenders and accountants indicate that margins for renters or people who lease are getting so thin that even the most efficient are not replacing machinery lines and upgrading both equipment and facilities. In economic terms, this is called "living off depreciation."
Landlords are going to be required to rethink the amounts charged to these producers. They could kill "the goose that laid the golden egg." That is, if fewer producers qualify for these high rents, this could lead to substantial discounts in rental value for marginal land or less productive land.
Landlords must realize that they want economically substantial renters that keep the stream of revenue from their 401K in land viable over a long period of time in a globally competitive environment.
It’s amazing how the Blue Bunny plant in Lemars is expanding. That plant sure kicks out a lot of ice cream!
During the Sioux Center meeting, I had a chance to visit with Vern DenHerder, a livestock and grain producer who was number 83 for the 1972 Miami Dolphins, the only undefeated team in NFL history. I have had a chance to meet a number of players from that team. They are very team-oriented and not into themselves. Vern is just a very classy individual.
Note Dolphin team salary in 1972 was just under $1.5 million. Today it is $56.1 million. Now, that’s time value of money!!
My e-mail address is: email@example.com
Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He recently completed a sabbatical working with the Royal Bank of Canada. He is now back at Virginia Tech with his academic appointment, which is teaching, extension, and applied research.
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